As so often, the economy is in the hands of politicians who are driven by other motives than the long-term health of the planet, or even the economy… Now, the alternative energy sector’s progress in the US is in danger, because of inaction on the political front. Two key pieces of legislation will decide the fate of the solar sector in the short-term.
First the general market, which fate is dependent upon the Paulson bail-out plan. Marc Faber (author of the legendary Gloom, Boom & Doom report), and thinks that the general market will rally quite a bit if that plan is adopted.
- Faber also forecast the Standard & Poor’s 500 Index will rally to as high as 1,350 points following the approval of the bailout plan because stocks are “oversold.” That level is about 14 percent higher than the gauge’s close yesterday.
- Still, “I’m not playing that rally,” he said. “I’d rather think that stocks are not particularly cheap. We don’t have a valuation bubble. We have an earnings bubble. In 2009, earnings will disappoint.”
The other, more fundamental piece of legislation awaiting is the extension of the tax credits for alternative energy (which expires at the end of the year in the US). We did see a rally earlier in the week, when the Senate approved the bill, but the House of representatives has rather made a mess of things.
- The House of Representatives didn’t just fail to ratify the Senate’s tax extenders package. It actually dismantled it. Separated it into 5 pieces. The surge in solar industry hopes, a one-day glimpse at the market forces to be unleashed when government policy finally does support New Energy, seems to have been premature jubilation.
- American poetess Emily Dickinson famously referred to hope as “…the thing with feathers…” For the New Energy industries, hope suddenly seems to be the thing without votes.
- Senate Majority Leader Harry Reid (D-Nev) warned the House not to undo the package he and Democratic leaders had carefully crafted to win approval from the Senate.
- Senate Majority Leader Reid: “Don’t send us back something else..It will not pass. If they try to mess with our package, it will die.”
- Is it possible the House will have the audacity to wreck havoc in perhaps the only sector of the market not crashing?
- Rhone Resch, President, Solar Energy Industries Association (SEIA): “We’re probably 50-50 at this point…”
- Vital New Energy tax credits will expire December 31 if the legislation does not pass. Expiration will likely drive the New Energy industries into recession for 2009.
- Some speculate Congressional hesitation is due to a fear there will be no revenues to fund the credits in the wake of the financial crisis bail out. But failure to extend them will make the crisis worse and a resuscitated New Energy sector will drive recovery.
- For the solar energy industry, the key to the measure is the investment tax credit (ITC) that allows system purchasers to deduct 30% of residential system cost and removes a $2,000 cap. That would drop the average cost of a 4-kilowatt home system from $28,000 to $21,000.
- Resch, on what passage means: “You’re going to see national markets open up for residential solar…”
- Research forecast: The 8-year tax credit extension means 440,000 new solar industry jobs and a doubling of new solar capacity to ~630 megawatts in 2009.
- Resch: “Congress has a moral obligation to not only bail out Wall Street, but ensure business interests continue to operate in the country…”
- The measure the House is screwing with also represents similar growth in the wind industry, the biomass industry, the marine energies industry, the energy efficiency industries and the plug-in hybrid electric car market.
- According to the White House, President Bush will sign the tax extenders package if and when it gets through Congress.
And since politicians have other things on their mind right now (elections, saving the US, etc.), it doesn’t look too promising for the near future..